Aussie dollar moves higher

THE Australian dollar has rallied to a one-week high as markets continue to react positively to a spike in domestic consumer confidence.

At 12pm AEDT today, the local unit was trading at 103.57 US cents, up from 103.39 cents yesterday. It reached 103.71 US cents this morning, its highest level since February 6.

Derek Mumford, senior consultant at Rochford Capital, said figures released yesterday, which showed a surge in consumer sentiment, were continuing to drive the market. The Westpac/Melbourne Institute Consumer Sentiment Index rose 7.7 per cent to 108.3 in February, its highest level since December 2010.

"The Aussie dollar has been moving up. We've had some good consumer confidence numbers yesterday which helped buoy the market," he said.

He said the Australian dollar had reached the bottom of its recent range earlier in the week.

"There's a general move we've seen in the Aussie, falling down to the bottom end over the last six months, and some people are locking in profit and taking some new positions for a runup to 104.50 or 105 (US cents)," he said. "The Aussie is coming up against the next line of resistance at 103.70 (US cents). It's at 103.63, so if it breaks 103.70 I could see it up towards 104.25 or 104.40 (US cents)."

The Australian dollar also climbed against the pound after the Bank of England predicted a sluggish recovery for the British economy.

"It looks very much like there's stagflation there," Mr Mumford said. "Inflation is continually over and above the Bank of England target, and growth is very low, if not negative."

"With the government trying to reduce their fiscal deficits it doesn't bode well for growth in the UK."

At 12pm AEDT the Australian dollar had reached 66.71 pence.

Meanwhile, the Australian bond market was weaker at noon. At 12pm AEDT today, the March 10-year bond futures contract was trading at 96.460 (implying a yield of 3.540 per cent), down from 96.520 (3.480 per cent) yesterday. The March three-year bond futures contract was at 97.110 (2.890 per cent), down from 97.150 (2.850 per cent).

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